DeFi’s purpose is to create greater financial inclusion. That’s the core mission, to lower the barriers of access to wealth generation so anyone with the internet can participate.
How do we get a mother in Mozambique to be empowered and participate? She’s not looking to day trade and purchase a Lamborghini. She might be looking to seek passive income so she can afford to pay bills or put her children through school.
For her, the DeFi user experience needs to be easily accessible, and easily understandable. She should be able to access it from her phone via a simple app, and be aware of the different options available to her.
But so far, it is those with the time and resources to understand and access the underlying technology and new financial tools who are reaping the benefits.
This is a serious problem.
Web3 is on the horizon. Yet in its current form it won’t fulfil its promise or see mass market adoption unless these new technological ecosystems are simplified via stronger user experiences. Complexity is the enemy, intimidating newbies from giving DeFi a try, and deterring its rollout as a mass market phenomenon.
Simplification of decentralized finance products is the key. That will demystify complex propositions and attract more users to this space. That will stoke the opportunity to use DeFi to foster financial inclusion, more liquidity, and more innovation, especially with user experience.
The Future of Finance is Decentralized, But Only if UX is Prioritized
The best technologies work without most users ever knowing how, why, or that it is even there. You don’t need to know how your WiFi functions or how your Gmail sends an email. The iPhone removed buttons in a breakthrough that created a fully functioning one-screen computer operating system, ushering in a new paradigm in UX design.
Cryptocurrencies should follow a similar adoption curve.
But many user interfaces appear to be made by developers rather than product managers and UX designers. As a result, the complexities of the DeFi ecosystem requires an intricate understanding to access these products and is limiting mass adoption.
It is unrealistic to expect newcomers to easily understand a new world of digital asset trading when you ask them to record a number of random keywords to ensure their money stays safe. It is unrealistic to expect newcomers to confidently and safely custody and transfer their assets across chains and wallets without hesitation, or appropriately insure themselves against the high risks of this new digital world of finance.
The DeFi user experience needs to be intuitive and easy, but this isn’t currently the case. For example, users need to be better educated on which respective digital wallets correspond to which blockchains. Users should be better alerted if they attempt to send assets to the wrong chain. Surprisingly, most platforms don’t offer this. Or, even better, they shouldn’t need to understand it at all.
Important tools need to be simplified. Take portfolio rebalancing, the process of realigning the weightings of assets to help manage risk and prevent overexposure,. If a user can’t do that easily they could be stung with unnecessary losses. Yet the process usually requires manually tracking and adjusting the allocation of respective assets to reduce losses from other assets, usually via separate trades of assets. We need more automated tools allowing users to allocate weightages at the click of a button, and reduce unnecessary steps.
Developers must also be mindful that they cannot assume newcomers have the education, experience and understanding of risks associated with DeFi. Users should also be clearly aware of hidden fees, or the potential for slippage losses before executing buy, sell and swap orders. Platforms like Orca do a great job at this.
DeFi Must Be More Inclusive to Witness Greater Adoption
Getting back to the example of an average working woman in a developing nation, we need to make it clear how long she should lock up her funds for the most optimal returns. She needs to see clearly how much she should deposit in order to get a certain amount of staking rewards.
She needs to be able to see clearly how much she should deposit to get a certain amount of financial rewards, or see what returns she’ll receive if she stakes a native token, as well as be able to forecast returns to make an educated decision around what wealth generation opportunities work best for her and her family.
She should feel empowered to make decisions around which platforms provide the most value in prices, swappage and yields. Jupiter and Sonar Watch and other aggregators are enabling this.
Then, we will see greater adoption.
A New Financial Future: How Can We Get There?
There’s so much at stake as traditional financial institutions move further into crypto and DeFi.
We’re seeing fintech giants like Square planning a platform for DeFi services on the bitcoin blockchain. We’re seeing Aave launch a DeFi platform catered for institutional investors with strict KYC procedures on both the lending and borrowing sides for investors with stringent regulatory requirements.
We also have mainstream companies outside of the banking system utilizing DeFi. Paperchain, for example, is using DeFi to speed streaming payments to musicians by using invoices as collateral for DeFi loans.
And MAPS.ME, the world’s most widely used offline maps for travel, has integrated DeFi into the back-end of its app with a goal to enable travellers to tap a button to earn yield. Greater collaboration between either side of the bridge will see the DeFi movement accelerate.
Leaders in DeFi Must Make DeFi More Secure and Accessible
Part of increasing the usability, accessibility and user-friendliness of DeFi is not just about making it easier. It’s also about making it safer, too. Users have suffered from over $12B in losses through crime on DeFi applications, with the majority of these losses being experienced in 2021 alone.
Bugs in code and design flaws are allowing criminals to launder proceeds of crime at the sacrifice of those less experienced in protecting themselves in this new realm of finance that champions the removal of third party intermediaries, putting DeFi technology on regulators’ hit lists.
DeFi is claimed to be the “Wild West” of crypto by many traditional financial leaders, and we owe it to the world to change this. UX includes the introduction of more secure infrastructure, more regular audits, and more bounty systems to ensure users are safe, and regulators don’t introduce harsh, rigid rules that limit what’s possible in this new financial system.
Hisham Khan is the CEO of Aldrin, a decentralized cryptocurrency exchange.